U.S. West Texas Intermediate crude oil futures are trading lower for the week, but a rally on Friday has helped the market erase most of its earlier losses. The highlight of the week has been the heightened volatility associated with an escalation of tensions between the United States and China.
This current elevated tensions actually started on August 1 when President Trump announced new tariffs against China. Volatility rose on this news, but spiked even higher when China retaliated by dropping its currency below the psychological 7 yuan to the dollar level and canceling all agricultural deals it had with the United States.
Concerns over a slowing economy then prompted the Reserve Bank of New Zealand to shock the markets with a 50-basis point rate cut in its official cash rate. This drove global bond yields sharply lower, while triggering fears over a global recession.
Worries about a recession increased the chances of lower crude oil demand, driving prices sharply lower. That steep break pushed prices to multi-month lows, but since that initial bearish reaction, the market has recovered more than half its losses on reports that OPEC would cut production to support prices.
Barring any further bearish developments between the U.S. and China, the news of an OPEC production cut could provide short-term support.
U.S. Energy Information Administration Weekly Inventories Report
On Wednesday, the U.S. Energy Information Administration (EIA) reported…